Economic Beat

One of the Costliest Ponzi Schemes Ever

Now is the time to grapple with deficit spending, before Uncle Sam must tell 80 million boomers to take a hike.

In a 1967 Newsweek column, the late Nobel laureate economist Paul Samuelson called Social Security "a Ponzi scheme that works." While Ponzi schemes in the private sector always go bust, the government's version worked, according to Samuelson, because it was financed by an ever-expanding tax base, which in turn was fueled by an ever-growing economy.

Samuelson's error has been effectively exposed by another Nobel Prize winner, economist James M. Buchanan, who died last month. According to Buchanan's public-choice...